Cold Storage Continues Its Hot Growth
Newmark report shows CRE unquestionably, “sold on cold” in the past two years.
The number of cold storage establishments grew by more than triple compared from 2021 to the first half of 2022, eclipsing the annual average of 2.2% observed from 2013 to 2020, according to a new report from Newmark.
This, after also having a heady year from 2020 to 2021, spiking by 8.6%. The asset class has plenty of room to expand: cold storage development accounts for only 1.5% of the total industrial development pipeline, Newmark wrote.
Multiple demand drivers are spurring the momentum, including the explosion of food and grocery e-commerce and supportive last-mile operations, especially in the Sunbelt.
E-commerce grocery sales are expected to grow at a 6.5% CAGR over the next five years, excluding inflation, outpacing the 2% expected for in-store sales, the report said.
Industry consolidation has also been healthy for the sector.
For example, Lineage Logistics, Americold, and others increased their share of the U.S. cold storage market through mergers, acquisitions, and development.
The big two now account for 71% of the storage capacity of the top 25 markets in 2022, compared to 61.0% in 2019.
The sector is also getting a boost from third-party logistics companies that are providing additive and complimentary fulfillment and logistics services.
The sector was overdue for modernization, as the average age of cold storage facilities in the top U.S. markets is 37 years.